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MONTHLY REVIEW o f C r e d it a n d S e c o n d Federal Reserve Agent B u s in e s s F e d e r a l D is t r ic t Federal Reserve Bank, New York B u s in e s s C o n d i t io n s in t h e U n it e d S t a t e s N D U S T R IA L output increased further in February and was slightly larger than a year ago, and dis tribution of commodities by the railroads was larger than fo r the corresponding period of any previous year. The general level o f wholesale prices continued to de cline and was in February at the lowest level since the summer o f 1924. I P r o d u c t io n Production o f manufactures increased in February fo r the second consecutive month, and the output of minerals, after declining in January, advanced once more in February to the record level reached last De cember. F actory production and employment, however, continued smaller than during the corresponding month o f last year. Production o f iron and steel has increased steadily since December, and reports indicate that operations o f steel mills in March were at almost the same high rate as in March 1926. Automobile p ro duction increased from 234,000 cars in January to 298,000 cars in February, and weekly figures o f em ployment in Detroit factories indicate some further additions to production in March, but output has con tinued much smaller than a year ago. D aily average consumption o f cotton by mills in February was larger than in any previous month on record, but activity o f woolen and silk mills decreased as compared with Janu P E R CENT Index Numbers of Production of Manufactures and Minerals, Adjusted for Seasonal Variations. (1923-25 average = IOO per cent). R e s e r v e C o n d itio n s April 1, 1927 ary. Production o f bituminous coal has been main tained in large volume, while that o f anthracite has been considerably reduced. The output o f building materials was smaller during the first two months of this year than in the corresponding period o f 1926. The value of building contracts awarded in February was 3 per cent smaller than in the same month o f last year, but awards fo r the first three weeks in M arch were in approxim ately the same volume as in 1926. Contracts in Southeastern and Northwestern states have been con siderably smaller than a year ago, while those in the Central W est have been much larger. T r ad e Retail trade showed less than the usual seasonal de cline between January and February. Sales o f depart ment stores and chain stores were larger than in F eb ruary o f last year, while those o f mail order houses were smaller. W holesale firms reported a smaller volume o f business in February than a year ago, and this decline occurred in nearly all leading lines. Inventories o f de partment stores increased in February in anticipation o f the usual expansion in spring trade, but the growth was less than is customary at this season and at the end o f the month stocks were slightly smaller than a year ago. Stocks o f merchandise carried by wholesale firms also increased in February, but they were generally smaller than in the corresponding month o f last year. PER CENT. Federal Reserve Board's Indexes o f Factory Employment and Payrolls. (1919 average = 100 per cen t). M ONTHLY REVIEW, APR IL 1, 1927 26 TER CENT. Price Indexes o f United States Bureau o f Labor Statistics. (1913 average = 100 per cen t). 1923 1924 1925 1926 1927 W eekly Rates in New Y ork M oney M arket; Commercial Paper Rate on 4 to 6 Months Paper and Acceptance Rate on 90 Day Paper. Railroad shipments o f commodities have increased steadily since January by more than the usual seasonal amount and have exceeded those fo r the same period last year, owing to larger shipments o f coal, o f miscel laneous commodities, and of merchandise in less-thancar-load lots. Conditions in the money market in M arch were slightly firmer than in February. Rates on prime c o m mercial paper advanced from 4 per cent to 4-4% per cent and call money was also higher, while rates on acceptances declined somewhat. P rices W holesale prices, according to the index o f the B u reau of Labor Statistics, continued to decline in F eb ruary. A m ong non-agricultural products decreases occurred in the prices of coal, petroleum, iron and steel, noni'errous metals, and lumber, and the index fo r non agricultural prices as a group was at the lowest post war level. Prices o f livestock and livestock products and of clothing materials advanced in February. D ur ing the first three weeks of M arch there were decreases in prices o f grains, livestock, sugar, silk, wool, coal, petroleum, and gasoline, while prices of potatoes, pig iron, hides, and rubber advanced. B a n k C redit Demand fo r commercial credit at member banks in leading cities increased seasonally between the middle o f February and the m iddle of March. There was also growth in the volume o f funds used in the security market as indicated by increases in loans to brokers and dealers in securities. Consequently total loans o f the reporting banks at the end o f the period were close to the level of last autumn. Financial operations o f the United States Treasury around the middle o f March, with disbursements tem porarily in excess o f receipts, re sulted in a temporary abundance o f funds which was reflected at member banks in leading cities in a growth of deposits, in reduced indebtedness at the Reserve Banks, and in increased holdings o f securities. A t the Reserve Banks, follow ing changes in holdings o f bills and securities accom panying the financial opera tions o f the Treasury, the total volume of credit out standing on March 23 was somewhat larger than fou r weeks earlier. M on ey M a rk et The event o f chief interest in the money market dur ing March was the series of transactions centering in Treasury financing on March 15. Operations of this recent tax date differed from usual tax day operations p rincipally in their huge volume, and the resulting problem in avoiding disturbance to the money market. Treasury transactions fo r the country as a whole in clu ded : the redem ption o f $660,000,000 o f Treasury notes, the largest maturity in some years ; the issuance o f two new series o f certificates o f indebtedness, $170,000,000 at 3 % per cent for six months, and $314,000,000 at 3% per cent fo r one y e a r; the issuance of $1,355,000,000 o f Treasury 3 % per cent three to five year notes in exchange fo r Second Converted 4 % per cent Liberty Loan bonds, redeemed with interest to M ay 15, 1927; the paym ent o f $90,000,000 o f interest; the withdrawal o f $192,000,000 o f Government deposits from depositary banks; and the collection o f over $500,000,000 of income taxes. The total turnover of Govern ment funds on and about M arch 15 was well over three billion dollars. Much o f this, particularly the collec tion o f income taxes, was spread over a number o f days and distributed about the country. The first day o f the tax period, the 15th o f the month, is always the heaviest day, however, and in all such operations between onethird and one-half o f all transactions takes place in New Y ork. A s a consequence, the volume o f operations o f the New Y ork Reserve Bank o f March 15 was one o f the largest fo r any day in its history. The total turnover of funds on that single day, including both transactions fo r Treasury account and ordinary banking operations, was close to two billion dollars. This total was made up roughly as follow s: FEDERAL RESERVE i Fiscal Agency Operations Income taxes collected................................. ........................... $ 343,000,000 548.000.000 136.000.000 32,000,000 8 ,000,000 $1,067,000,000 Banking Operations Checks and other collections.................................................. W ire transfers ........................................................................ Currency payments and receipts.......................................... .................................................... $ 530,000,000 243,000,000 28,000,000 10 ,000,000 75,000,000 T o t a l ....................................................................................... $ 886 ,000,000 Total All Operations....................................................... $1,953,000,000 Member bank loans paid Certain o f these very large Treasury operations have no effect on the money market beyond some churning about of funds. They do not involve any gain to the money market or any loss to the market. The exchange of 3 1/2 per cent notes fo r Second Liberty 4 * 4 ’s, fo r ex ample, neither withdraws funds from the market nor puts funds into the market. Similarly, the issue o f new certificates does not affect the money market, since these certificates are largely paid fo r by deposit credit to the account of the Government on the books o f the subscribing banks, and there is no withdrawal o f funds until the Treasury from time to time makes calls upon these deposits as it has need fo r funds. The Treasury operations which did exercise an important effect upon the money market were the redemption o f m aturing notes, the payment o f interest, the call of funds from depositary banks, and the collection o f income taxes. The immediate effect o f Treasury operations on March 15 was to pour into the money market about 265 m illion dollars of funds, because payments by the Treasury to redeem maturing notes and to pay interest were imme diately available, whereas the actual collection o f income tax checks by the Treasury was spread over a number of days. The money market problem, in which the Federal Reserve Bank was concerned, was to prevent this huge gain in funds by the market on M arch 15 from upsetting the market. The extra funds put into the market by the Treasury were absorbed in the follow ing w a y s : 1. Member banks in New Y ork City allowed their re serves to run below requirements fo r a few days prior to March 15, so that they came to March 15 with an accumulated deficiency o f 85 m illion dollars. 5. Maturities o f $25,000,000 of securities from the System ’s holdings were not replaced until the fo l lowing week. B y these means the greater part o f the 265 millions o f excess funds was withdrawn from the market and as a consequence there was no serious overage o f funds in the market. Money rates in the stock exchange market only went below 4 per cent fo r a few hours on March 16; on March 17 and 18 the member banks resold to the Reserve Banks the securities they had purchased, and on March 18 they foun d it necessary to borrow 117 m illion dollars from the Reserve Bank to bring their average reserves up to requirements. Thus money con ditions were maintained at a stable level during the week. The Reserve B an k ’s tem porary sale o f Government securities to the member banks was o f interest partly because it took a new form . Tem porary sales o f securi ties have frequently been made in the past at tax periods to prevent unduly easy money, but such sales have usu ally been made from the securities in the System ’s open market account, which are lodged in New York. The sale during the M arch tax period took the form o f the sale o f participations in the special one-day certificates o f indebtedness, which the Treasury issued to the New Y ork Bank to cover the funds which it borrow ed from the New Y ork Bank to cover its tem porary excess o f expenditures over receipts. Aside from Treasury operations there was during March a somewhat firmer tendency apparent in the money market, due in part to a seasonal increase in the demand fo r funds fo r commercial use and an increase in the amount o f credit employed in the security markets. Commercial loans o f all reporting member banks in creased 125 m illion dollars in all districts in the fou r weeks ended March 23. Loans on stocks and bonds of these banks increased by approxim ately 100 millions and throughout the country were about 200 m illion dollars higher than a year ago. P artly reflecting these changes, and partly as a consequence o f a reduction in holdings o f purchased bills by the Reserve Banks, there was an increase in the amount o f borrow ing by member banks at the Reserve Banks. The prevailing rate on call loans advanced to 4 % per cent during the last ten days o f March, after holding at 4 per cent during the previous eight weeks. M oney Rates at New York March 30, 1926 2. On M arch 15, banks repaid the Reserve Bank 63 million dollars of loans. 3. In addition, 18 million dollars o f Federal R e serve credit was retired through decreases in hold ings of bills and Government securities under sales contract. 4. The Reserve Bank made a temporary sale o f 60 million dollars o f Government securities to several member banks. 27 ;ENT AT NEW Y O R K Time money— 90 d a y ............................... Prime commercial paper......................... Bills— 90 day unendorsed....................... Treasury certificates and notes Maturing June 15............... Maturing September 15.. . Federal Reserve Bank of New Y ork— rediscount ra te...................................... Federal Reserve Bank of New Y ork— buying rate for 90 day b ills ............... * = Prevailing rate for preceding week. *5 4 % -4 % 4 ^ -4 3 ^ 3% Feb. 28, 1927 *4 March 30, 1927 *4^ 4 ^ -4 ^ 4 3 ^ -3 % 4 -4 K 3H 3 .02 3.21 3.15 3.19 3.31 3.39 4 4 4 3^8 3M 3X 28 MONTHLY REV! B il l M ar k e t The demand fo r bills reached unusually large pro portions by the middle o f March, due largely to buying for account o f foreign banks, and substantially exceeded the supply of new bills offered to the market. A s a result, dealers’ portfolios declined to about 50 m illion dollars, the lowest level since last October, and bill hold ings o f the Reserve Banks were reduced. In the latter part o f the month, the demand fo r bills became more normal and portfolios increased slightly. Dealers ’ o f fering rates on 30 and 90 day unindorsed bills, which showed a declining tendency late in February, became established early in March at 3 % and 3 % per cent re spectively, and rates on other maturities were un changed during the month. C om m er c ial P aper M ar k e t Commercial paper rates were slightly firmer in March than in the previous month but still remained about *4 o f one per cent below last y e a r’s level. Prim e paper sold at 4-414 per cent, while in February sales had been largely at 4 per cent. The investment demand on the part o f interior institutions was fairly active and in general remained equal to the rather limited amounts o f new paper that dealers were able to offer. In con nection with the supply of commercial paper available in the open market, an interesting development was the increase in the outstandings o f 26 dealers to $577,000,000 at the end o f February. This was an increase over January o f nearly 5 per cent, whereas in the corre sponding periods of 1925 and 1926 there was virtually no change. February outstandings, however, were 12 per cent smaller than a year previous. S e c u r it y M a r k e t s A feature o f the bond market in March was a rise in many issues of United States Government bonds to the highest prices since issuance, follow ing the announce ment o f new issues o f Treasury certificates and the offer to exchange Second Liberty Loan 4 % per cent bonds for 3 % per cent Treasury notes. Corporation bonds were also strong and average prices advanced about one-half point to the highest levels since early in 1913. A large number of foreign issues like wise sold at the highest prices in recent years. Yields o f high grade bonds in recent months have continued the gradual decline of the past three years, and are now only slightly higher than in 1916. Stock prices fluctuated irregularly, with wide dis parity between the movement o f different stocks. R ail road stock averages near the close o f the month were slightly above the high levels of February, while indus trial stock averages were somewhat below. Trading continued active, and sales averaged nearly two million shares daily. N e w F i n a n c in g Most classes o f security issues showed some decrease in March from the very large totals fo r the previous V, APRIL 1, 1927 two months o f the year, but the total fo r the month was somewhat larger than fo r M arch 1926. Railroad offer ings continued unusually large in both number and amount, due in part to the flotation o f numerous equip ment trust issues. F o r the first quarter o f the year new financing of all kinds has been about one-third larger than in the corresponding period o f 1926. Foreign issues were larger than a year ago, in both March and the first quarter o f the year. Offerings of $30,000,000 o f City o f Rome and $20,640,000 o f City o f Tokio bonds were the principal foreign issues in March, and there was a continuance o f Australian financing by a $7,500,000 issue o f the City o f Brisbane. T h e F o r e ig n E x c h a n g e s D uring March, the foreign exchanges continued the gradual rising movement begun in February, and toward the end o f the month were quoted at or near the best figures fo r the year to date. Sterling, which was down to $4.8450 in February, reached $4.8531 on March 28; German marks have risen from 23.69 cents to 23.73 cents; Netherlands florins from 39.92 cents to about 40.00; and Swedish crowns from 26.67 cents to 26.78 cents. French francs were steady at about 3.91 cents; Italian lire rose above 4.61 cents to the highest level since 1923, and Spanish pesetas to 18.09 cents, the highest since 1920, com pared with a quotation o f 15.36 cents in January. Norwegian crowns crossed 26 cents to a level about % cents below parity. Similar strength was apparent in certain A m erican rates. The Canadian dollar rose sharply from 99.81 cents on March 16, to a premium sufficient to attract gold from the United States near the end o f the month. Argentine pesos advanced nearly to parity. In the F ar East, the rupee strengthened upon the vote establishing its legal parity at Is. 6d., and Japanese yen, over 49 cents, were at the best level fo r the current year. Silver and the silver exchanges were irregular at levels somewhat lower than those o f the previous month. The fluctuations in the metal in February were between a high o f 60^/2 cents and a low o f 5 6 ^ cents; in March the range was between 57 cents on the first to 54% on the 16th. Movements o f the silver currencies were similar. C h a n g e s in C e n t r a l B a n k R a t e s D uring March, the central banks o f fou r countries reduced their discount rates as fo llo w s : Czecho-Slovakia from 5 % to 5 on March 7 ; Japan from 6 .57 to 5.8 4 on the 9 th ; Poland from 9 to 8y2 on the 11th and Finland from i y 2 to 7 on the 23rd. The March reduction in the rate o f the Bank o f Poland follow ed a reduction from 9y2 to 9 in February. In the first quarter o f the current year discount rates have been reduced in 9 countries and increased in only one, India. 29 FEDERAL RESERVE AGENT AT NEW Y O R K MILLIONS OFDOLLARS millions ofpounds M IO M/U&ON5 O FIL DLO LLN ASRS O FBALES millions O FPOUNDS ILO LIO NRSS O M LIO OM FD LLA FIL BU SHN ELSS M ILO LIO NRSS O FD LLA Quantity and Value of Imports of Rubber and Silk, and Exports o f Cotton and W heat (Including W heat Flour Converted into Equivalent Bushels of Grain). G o ld M o v e m e n t Gold imports during February reached a total of $22,300,000, against exports o f about $2,500,000, and March imports at New Y ork were $5,800,000 against ex ports o f $4,400,000, thus increasing the net im port fo r the first three months o f this year to approximately $68,000,000. The principal imports in February were from E n g land, France, and Japan, continuing movements which were started in previous months. A fte r one shipment in the first week o f February the Canadian movement ceased until early in March, when $4,500,000 additional was received before Canadian exchange advanced above the gold shipping point, and eventually above par. Shipments o f $3,000,000 to Canada were made near the end of the month. Further shipments from Japan were reported in March. Gold movements fo r the first two months of the year and fo r the greater part o f M arch are summarized in the follow ing ta b le: (In thousands of dollars) January and February, 1927 United States Source or Destination Imports C anada.............................. France............................... E ngland............................ G erm any........................... M e x ico............................... C h ile.................................. C hina................................. Japan................................. British M a la ya ................ All other............................ T o ta l.............................. $39,330 20,996 7*309 .........998 2,635 3,243 8,000 Exports $ 109 13,655 1,121 492 March 1 to 30 New York and St. Lawrence Districts Imports $ 4,500 Exports $ 3,000 9 983 67 519 1,743 434 1,493 351 620 177 $84,254 $17,304 $ 5,843 $ 4,383 rubber prices has had an im portant influence upon the dollar value o f total imports, and in February the quan tity im ported dropped sharply, so that the value of crude rubber im ported during the month was probably $35,000,000 smaller than in February 1926, though the precise figure is not yet available. Silk imports also declined sharply in February after holding at high levels, and the value was much smaller than a year previous. E xports were increased chiefly by heavier shipments of crude materials than a year ago. Cotton exports, due to low prices, have been much larger in quantity in the past fou r months than in the same period last year, and in February were larger in value also. Grain ship ments have been m uch larger than in the 1925-26 crop year, and the increased quantity has more than offset lower prices. Coal exports also have been considerably larger than a year ago. B u ild in g B uilding contracts awarded in February in the 37 states reported upon by the F . W . D odge Corporation report were 3 per cent larger than in January, but 3 per cent below the total fo r February 1926. The total fo r the first two months o f this year was 10 per cent smaller than in the corresponding period o f last year. Residential building continued below the level o f a year ago fo r the eighth consecutive month, and public works projects were somewhat smaller than last year, but contracts fo r commercial, industrial, and educa tional buildings were larger. In the New Y ork and Northern New Jersey district, contracts awarded were about 1 per cent below February o f last year. Residential and educational building, and public works projects continued below last y e a r’s level while awards fo r commercial buildings were larger. F o r e ig n T r a d e I n d e x e s o f B u s in e s s A c t i v i t y Exports1 o f merchandise in February, valued at $373,000,000, were $20,000,000 larger than a year ago, while imports valued at $312,000,000, were $75,000,000 smaller. Consequently, there was an export balance of $61,000,000, as compared with an import balance of $34,000,000 in February of last year. Some of the principal factors in this change in the balance of trade during the past year are shown in the accom panying diagrams. The rapid decline in crude A higher rate o f business activity in February than in the preceding month is indicated by most o f this bank’s indexes o f business activity. Bank debits in centers throughout the country maintained a higher level than a year ago, and in New Y ork City were sub stantially larger. Car loadings o f merchandise and mis cellaneous freight showed an increase over January after allowance fo r seasonal change, and about the usual yearto-year increase over a year p reviou s; railway traffic in 30 MONTHLY REVIEW, APRIL 1, 1927 the heavier freight continued substantially larger than a year ago. The follow ing table gives fo r recent months and a year ago this bank’s indexes o f business activity as per centages of the com puted trend, after allowance fo r seasonal variation, and, where necessary, fo r price changes. 1926 Steel com panies. . . R .R . equipment. . . 1923 Dec. Jan. Feb. Primary Distribution Car loadings, merchandise and m isc........ Car loadings, other...................................... E xports............................................................ Im ports........................................................... Grain exports................................................. Panama Canal traffic.................................. Ill 100 85 126 37 96 105 112 92 117 63 84 106 104 90 116 66 77 110 107 94 p 106 p 57 Distribution to Consumer Department store sales, 2nd D ist............. Chain store sales.......................................... Mail order sales............................................ Life insurance paid fo r ................................ Real estate transfers.................................... Magazine advertising.................................. Newspaper advertising............................... 100 96 121 109 113 103 107 107 101 138 121 106 103 103 104 94 117 101 95 99 100 105 98 121 113 113 124 106 108 126 103 115 132 107 116 134 105 104 101 108 103 118 170 100 110 104 96 144 124 124 195 105 117r 101 110 158 114 127 159 94 113 100 103 130 114 134 204 97 187 186 185 184 io 2 103 io o p 107 153 116 * = Seasonal variation not allowed for. p = Preliminary. r —Revised. 1924 192 1926 24 13 32 19 $194,226 48,879 167,041 151,602 $136,739 27,850 205,376 124,189 $165,042 18,271 319,425 249,753 $211,277 40,742 353,754 295,951 17 12 30,351 20,457 21,795 36,185 35,228 71,909 29,272 34,201 38 15 10 134,324 73,826 6,758 147,751 84,974 20,720 154,063 94,508 20,346 173,158 104,175 19,256 25 20 20 11 37,689 86,059 46,912 19,168 4,031 88,221 47,378 2,908 18,739 110,548 68,633 3,589 9,864 115,205 85,037 4,961 21 16 30 80 33,725 62,673 85,769 141,586 32,143 64,727 78,552 156,623 50,101 74,932 86,228 193,215 58,919 91,120 85,275 205,303 403 $1,341,045 $1,280,162 $1,734,530 $1,917,470 70 $136,705 $150,708 $186,778 $211,343 42 119,451 134,808 155,247 183,655 Total public utilities 112 $256,156 $285,516 $342,025 $394,998 Total 19 G ro u p s... 515 $1,597,201 $1,565,678 $2,076,555 $2,312,468 Class 1, R .R ............ 186 $983,736 $987,133 $1,136,973 $1,231,494 Food and food 1927 Feb. General price level....................................... Number of Corpora tions M otor accessories (excl. tire s)......... (Computed trend of past years=100 per cent) General Business Activity Bank debits, outside of N. Y . C it y ......... Bank debits, New Y ork C it y .................... Bank debits, 2nd Dist. excl. N. Y . C ity. Velocity of bank deposits, outside of New York C it y ........................................ Velocity of bank deposits, New Y ork C it y ....................... ................. Shares sold on N. Y . Stock E xch an ge*.. Postal receipts............................................... Electric p ow er............................................... Employment in the United States........... Business failures........................................... Building perm its........................................... New corporations formed in N. Y . State. Net profits in thousands of dollars Leather and shoes.. Clothing and Metal and m ining.. C o a l.......................... Machine & Mach. manufacturing . . Chemical and drug. Building supplies. . Misc. industries .. . Total 17 G ro u p s... Other public P r o d u c t io n A m ajority o f the principal industries showed in creased activity in February, after allowance fo r the usual seasonal changes. The daily rate o f pig iron p ro duction increased about 4 per cent and total output was slightly larger than a year ago. Production o f steel in gots increased even more, considering the number o f working days in the month, but remained somewhat (Computed trend of past years = 100 per cent) B u s in e s s P r o fit s Net profits o f 403 industrial and mercantile corpora tions in 1926 averaged 11 per cent larger than in 1925, and 50 per cent larger than in 1924. The increases over the preceding year were not as consistent as in 1925, but more than half o f the industrial groups shown be low had the largest earnings in recent years. Profits in the railroad equipment industry in 1926 were more than double those o f 1925, and steel, oil, and motor com pany profits were the largest in several years. E x cluding the General M otors Corporation, however, the motor group showed smaller net earnings than in 1925. M otor accessory corporations also reported reduced profits, and rubber com panies’ profits were the smallest since 1923, reflecting inventory losses caused by the sharp decline in crude rubber prices. A fter showing some improvement in 1925, earnings of the textile and clothing group again declined in 1926 and were little more than one-fourth as large as in 1923. Coal mining profits also were only about one-fourth as large as in 1923, but were larger than in 1924 or 1925, reflecting the effects of the British coal strike. Profits o f telephone and other public utility companies continued to increase, and the net operating income of leading railroads was the largest in recent years. 1926 1927 Feb. Dec. Jan. Feb. 108 112 114 108 100 106 113 104 105 92 108 110 69 121 105 105 126 106 112 115 127 107 110 99 120 110 80 107 104 99 120 109 107 102 127 112 98 95 124 83 71 129 108 108 130 108 93 98 106 116 114 76 116 90 94 74 109 136 129 127 100 92 ** 147 152 128 102 115 123 76 138 94 100 72 101 158 134 119 89 98 92 79 73 102 99 106 110 81 106 84 100 72 110 160 131 115 88 86 83 109 103 133 Producers' Goods Steel ingots..................................................... Bituminous coa l............................................ Copper, U. S. m ines.................................... T in deliveries................................................. Z in c.................................................................. Petroleum ....................................................... Gas and fuel o il............................................. Cotton C onsum ption.................................. W oolen mill activity* C em ent........................................................... L um ber........................................................... Leather, so le .................................................. Silk consum ption*........................................ Consumers' Goods Cattle slaughtered........................................ Calves slaughtered....................................... Sheep slaughtered........................................ Hogs slaughtered.......................................... Sugar meltings, U. S. p orts....................... W heat flour................................................... Cigars.............................................................. Cigarettes....................................................... T obacco, m anufactured.............................. Gasoline.......................................................... T ires................................................................ Paper, to ta l.................................................... Boots and shoes............................................ Anthracite co a l............................................. Automobile, a ll............................................. Automobile, passenger................................ Automobile, truck........................................ * = Seasonal variation not allowed for. **=Strike. p=Preliminary. io s 92p 99 iii 106 109 116 75 90 99 66 107 iis 95 92 p 85 118 119 114 FEDERAL RESERVE AGENT AT NEW Y O R K smaller than in 1926. Bituminous coal production, an ticipating a strike, was considerably higher than in the corresponding month of any recent year, and the rate o f output o f anthracite mines was little changed from the previous month. Domestic mill consumption of cot ton was the largest fo r any February, but activity o f woolen and silk mills was curtailed. D e p a r tm e n t S to re T r a d e Sales o f New Y ork City department stores were very irregular in February, and on the average were about the same as a year previous. In most other sections of this district, however, sales com pared much more favor ably with those o f a year ago than they did in January. Westchester stores continued to report large increases, and the average gain in Newark stores was the largest in recent months. Increases follow ing January decreases were reported in Rochester, Syracuse, Northern New Y ork State, and the Hudson R iver V alley district. A pparel store sales showed the largest increase since November. 31 remained smaller than a year ago in both cases. Total payrolls showed larger increases than the number em ployed, due to more full-tim e operation than in January. The principal increase in activity in February was in the apparel industries. Some o f the metal working industries, including the automobile industry, reported larger working forces, but employment in building ma terials declined to the lowest level o f the winter. The accom panying diagram indicates that the lower level o f factory work than a year ago, together with few opportunities fo r outdoor employment, has resulted in reductions in the demand fo r workers and in labor turnover in recent months to the lowest levels in several years. Percentage Change February 1927 from February 1926 Locality Net Sales Stock on hand end Collec of month tions* A cc’ts R eceiv able* New Y o r k ........................................................... B uffalo................................................................. R ochester............................................................ Syracuse.............................................................. N ewark................................................................ B ridgeport.......................................................... Elsewhere........................................................... Northern New York State......................... Central New York S ta te............................ Southern New York S tate......................... Hudson River Valley D istrict................... Capital D istrict............................................ Westchester D istrict.................................... + 0 .1 — 0 .6 + 2 .8 + 1.1 + 1 3 .1 — 10.1 + 4 .9 + 4 .9 — 9 .3 + 7 .0 + 1 3 .3 — 1 .2 + 1 8 .2 — 1.1 — 11.0 + 1.4 — 22.1 — 0 .4 — 1.1 + 6 .6 + 4 .4 — 1.1 + 1 4 .1 +ii.4 + 1 4 .9 + 1 2 .6 + 7 .6 All department stores...................................... + 1.9 — 2 .0 + 6 .9 + 5 .9 Apparel stores................................................... M ail order houses............................................ + 8 .6 — 4 .1 + 2 .7 + 1 .7 — 4 .1 + 2 3 .6 W h o le s a le T r a d e *=E xclusive of instalment accounts. Net Sales Percentage Change February 1927 from February 1926 Stock on Hand Percentage Change February 28, 1927 from February 28, 1926 + 2 0 .9 + 2 0 .7 + 1 5 .3 + 1 3 .8 + 1 3 .2 + 1 0 .7 + 8 .6 + 8 .2 + 6 .3 + 6 .1 + 4 .7 + 3 .4 + 2 .2 + 0 .3 _ 7 <4 — 9 .7 — 2 0.6 — 2 5.5 — 2 .0 — 4 .9 — 11.0 + 0 .9 — 5 .0 + 4 .2 — 6 .0 — 0 .7 + 2 .7 — 13.7 + 1 4 .8 — 2 .8 — 4 .6 + 4 .2 — 4 .9 + 5 .4 — 13.3 — 11.4 — 2 8.4 — 12.1 T oys and sporting good s.......................... H osiery......................................................... W om en’s and Misses’ ready-to-wear. . . Books and stationery................................ Linens and handkerchiefs........................ Toilet articles and drugs.......................... Home furnishings.......................... ............ Luggage and other leather good s........... Silks and velv ets........................................ Furniture...................................................... W om en’s ready-to-wear accessories. . . . Silverware and jew elry............................. M en’s furnishings....................................... M en’s and B oys’ w ear.............................. Shoes............................................................. Cotton good s............................................... Musical instruments and rad io............... W oolen good s .............................................. Miscellaneous.............................................. E m p lo y m e n t a n d W a g e s F actory employment showed a seasonal increase o f 1 per cent in New Y ork State and of nearly 2 per cent in the country as a whole from January to February, but Ratio of W orkers Called for by Employers to Each 100 Applicants for W ork at New York State Employment Offices, and Ratio of Voluntary Resignations to Total Number o f Employees of Representative Employers Reporting to the M etropolitan L ife Insurance Company. Reports from dealers in fifteen lines o f wholesale trade in this district continued to show a smaller aggregate volume o f business than a year ago, although decreases in several lines were less marked than in the report for January. Percentage Change February 1927 from January 1927 Comm odity N et Sales — 9 .3 Men's c lo th in g ............. + 8 9 .3 W om en’s dresses........... + 9 .4 W om en’s coats and suits + 5 1 .3 Cotton goods— Jobbers. + 3 4 .0 Cotton goods — Com mission ........................ — 1.4 + 3 .8 + 3 1 .6 D rugs.............................. — 5 .7 + 1 1 .4 Machine to o ls* * ........... + 1 6 .6 — 4 .3 P aper............................... — 9 .2 — 3 .7 + 2 1 .9 Weighted A verage........ + 2 2 .5 Stock end of m onth — 0 .3 + 4 .9 — 4 .4 * + 1 7 .4 + 6 .7 }+ 7 .6 Percentage Change February 1927 from February 1926 Net Sales — 6 .0 — 11.4 — 23.5 — 6 .2 — 6 .0 — 17.7 — 7 .8 + 1 6 .4 + 4 .9 — 0 .3 — 1.8 — 6 .8 + 3 .3 — 2 .9 — 2 0.6 — 6 .6 Stock end of month Colleotions A cc’ts R eceiv able — 5 .5 — 8 .3 — 3 .7 — 9 .0 — 3 .6 — 16.7 — 7A — 14.4 — 5 .7 — 11.7 — 7 .2 — 15.4 + 1 6 .6 + 4 .2 — 6 .9 — 0 .4 + 1 9 .4 — 3 .0 — 0 .5 — 0 .9 ] — 4 .0 ] — 2 .3 — 5 .3 — 4 .0 + 4 .4 * + 6 .0 + }+ 1.2 6 .2 * = Quantity not value. Reported by the Silk Association of America. * * = Reported by the National Machine T ool Builders’ Association. R e la tio n s w ith M em b er B a n k s The following extract is from the thirteenth annual report of the Federal Eeserve Board covering operations for the year 1926. ISCOU NT and open-market policies o f the R e serve Banks, which are form ulated prim arily with a view to influencing the cost and the vol ume of Reserve Bank credit in use, are the principal elements in the System ’s general credit policy in rela tion to general banking and credit conditions. In their relations with individual member banks, however, the Reserve Banks are constantly dealing with a large num ber of problems not involving rates or market policies, and, on the basis of experience, progress has been made in 1926 in the form ulation of certain principles o f proce dure in what may be called the individual bank credit policy of the Reserve Banks. In general, the basis of credit to be extended by a Reserve Bank to its member banks is defined in section 4 o f the Federal Reserve A ct, which states that the board o f directors of a Reserve Bank shall 44extend to each member bank such discounts, advancements, and ac commodations as may be safely and reasonably made with due regard for the claims and demands o f other member banks.” This statement in the basic law o f the Federal Reserve System underlies to a large extent the policy o f the Reserve Banks and their attitude in indi vidual cases toward extending credit to the member banks. The principle set forth in the A ct goes beyond the question of the technical eligibility and even o f the intrinsic soundness of paper offered by a member bank to a Reserve Bank. Even where the paper is unexcep tionable in every respect, the Reserve Bank must be fu lly assured in addition that further credit may be granted to this member, not only “ safely and reasonably,” but also “ with due regard fo r the claims and demands of other member banks.” This question arises not in fre quently in cases where a member bank remains continu ously in debt to a Reserve Bank for a considerable length o f time. In such cases inquiry may fairly be made as to whether the member ban k ’s use o f Reserve Bank credit does not in effect amount to increasing its own capital out of Reserve Bank funds. Such use of funds arising from a cooperative pooling of bank re serves, which is the basis o f the Federal Reserve B anks’ lending power, would not be in accordance with the spirit of the Federal Reserve A ct and would not be fair to the other member banks which may be active com peti tors of the borrow ing bank. It may also impair the ability of the borrow ing bank in case of insolvency to meet its obligations to depositors. Though there are circumstances that may explain and ju stify continuous borrow ing by a member bank over a considerable period o f time, particularly if the need fo r the borrow ing arises from general economic conditions in the borrowing bank’s locality, the funds of the Federal Reserve Banks are prim arily intended to be used in meeting the sea sonal and temporary requirements o f members, and con tinuous borrow ing by a member bank as a general practice would not be consistent with the intent o f the Federal Reserve Act. In most cases the member bank can make adjustments of different kinds in its own affairs, which will enable it to repay its borrowings at the Reserve Bank and at the same time to strengthen its D own position. The bank may find it advisable, fo r example, to increase its own capital or to bring about a better adjustment of the volume and maturities of its investments to the credit requirements o f its local customers. In consequence o f the cooperation between Reserve Banks and member banks in working out the problems o f continuous borrowers, there has been a gradual de cline in the number o f member banks continuously in debt at the Reserve Banks. The follow ing table shows, fo r quarterly dates o f the past fou r years, the number of member banks that have been borrowers continuously fo r a month or more at a Reserve Bank in an amount exceeding the borrow er’s capital and surplus. Particu lar significance attaches to borrow ings in excess of cap ital and surplus, because prior to the establishment o f the Federal Reserve System, National banks were not permitted by law, with certain exceptions, to borrow in excess o f their own capital resources. Thus member banks that are borrow ing in excess o f that amount have been enabled to do so by provisions o f the Federal Reserve A ct, and the System, therefore, has a special interest in observing the extent to which this privilege is utilized. N u m b e r of C M B em b er a p it a l for Year 1923.................................... 1924.................................... 1925.................................... 1926.................................... a n k s Su an d a M March * 326 140 111 B o r r o w in g r p lu s o n t h C or in E xcess of o n t in u o u s l y M ore June September * 431 218 193 543 364 202 198 December 357 179 133 113 * Not available. The proportion which continuous borrow ing consti tutes o f total borrow ing at the Reserve Banks also has declined. D uring 1924 about 15 per cent o f the total volume o f member bank borrow ing at the Reserve Banks represented indebtedness continuously fo r a month or more in excess o f the borrow ing banks’ capital and surplus, while during 1926 this proportion was 5 per cent. In using their influence to discourage member banks from making continous use o f the lending facilities of the Reserve Banks, the operating officials o f the Reserve Banks are not only protecting the resources o f the F ed eral Reserve System as a wThole, but are also helping individual member banks to conserve their capacity to borrow at the Reserve Bank at times when adverse eco nomic conditions in their localities and among their customers may make additional dependence upon the resources o f the Reserve System not only justifiable but necessary. In this manner the Reserve Banks are not only discharging their responsibility to the member banks under the A ct, but are also exerting their influ ence toward sounder general banking conditions in the interests alike o f the member banks, their depositors, and the public.
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